Economic Overview
Los Angeles (LA) County employment increased by 33,900 nonfarm jobs, or 0.7% year over year (YOY), between August 2025 and August 2026, reflecting modest employment gains amid a moderating economic environment. Job gains remained concentrated in healthcare and education (+32,600 jobs, +3.3% YOY), sectors that provide limited direct support for warehouse and distribution (W/D) demand. In contrast, trade, transportation and utilities - core industrial demand drivers - declined by 2,600 jobs, or 0.3% YOY, while manufacturing fell by 3,800 jobs, or 1.3% YOY, indicating continued weakness in industrial-related employment. Construction employment also declined by 200 jobs, or 0.1% YOY,¹ reinforcing a cautious outlook for near-term industrial expansion.
The unemployment rate improved modestly to 5.2%, down from 5.6% a year earlier,² suggesting gradual labor market stabilization. However, mixed employment trends, combined with ongoing economic and trade-policy uncertainty, continue to weigh on industrial occupier sentiment and expansion decisions.
Port activity across the Ports of LA and Long Beach - a key indicator of industrial demand - remained resilient through the first eight months of 2026. In August, the Port of LA processed 955,907 twenty-foot equivalent units (TEUs), down 0.3% YOY, while the Port of Long Beach handled 919,992 TEUs, up 2.0% YOY, reflecting continued cargo movement amid trade-policy uncertainty. Year-to-date (YTD) throughput also remained positive, with LA up 1.5% YOY to 7.0 million TEUs and Long Beach up 1.3% YOY to 6.7 million TEUs,³ providing a stable foundation for regional W/D activity.
While cargo flows remain stable, uncertainty surrounding tariffs and global trade dynamics continues to constrain visibility into future shipping volumes and occupier requirements. Overall, resilient port activity should continue to support regional industrial demand. However, economic uncertainty and shifting trade policies may slow expansion among importers, logistics providers and other port-dependent occupiers.
Supply and Demand
Vacancy across LA’s industrial market increased for the first time since Q4 2024. In Q3 2026, the overall vacancy rate rose 30 basis points (bps) quarter over quarter
(QOQ) to 4.3% but remained 10 bps below the year-ago level. Despite the quarterly increase, vacancy remains below its recent peak, reflecting a market that continues to rebalance gradually. Net absorption turned negative for the first time since Q3 2024, totaling negative 1.5 million square feet (msf) in Q3. However, YTD net absorption remained positive at 1.8 msf, indicating that earlier occupancy gains continue to outweigh the latest quarterly losses. The availability rate increased for the first time since Q2 2025, reaching 5.8% in Q3 2026. Total available space rose to 45.8 msf, driven primarily by a 6.9% QOQ increase in direct available space. Sublease availability also expanded to 14.0% of total availability, giving occupiers more options.
Leasing activity moderated to 7.6 msf in Q3 2026, down 36.7% QOQ and 24.9% YOY, although cumulative activity through the first three quarters remained the strongest since 2021. The YTD total of 29.0 msf was 6.5% ahead of the pace set in 2025, reflecting sustained leasing momentum despite a slower third quarter. LA South accounted for 37.2% of Q3 2026 leasing volume, followed by LA Central at 23.2%, highlighting continued demand in the region’s major industrial corridors.
Pricing
Average asking rent increased for the first time since Q2 2023, rising $0.02 QOQ to $1.33 per square foot (psf) per month on a triple net basis. After rapid growth during the pandemic era, asking rents entered a prolonged decline before stabilizing in Q2 2026 and posting a modest increase in Q3. Despite this recent improvement, asking rent remains $0.02 psf below year-ago levels and $0.38 psf below its 2023 peak. The quarterly increase suggests that pricing may be approaching a floor following an extended period of rent adjustments. However, current asking rents remain elevated relative to many existing lease rates, creating substantial rent increases for tenants renewing or relocating from older, lower-cost space. As a result, occupiers remain highly price-sensitive, prolonging lease negotiations and increasing reliance on concessions as landlords compete to secure tenants.
Future Inventory
While many U.S. markets face elevated supply pressure, LA’s industrial construction pipeline remains relatively modest. At the end of Q3 2026, 39 buildings totaling 6.5 msf were under construction. Developers delivered four buildings totaling 674,332 square feet (sf) in Q3 2026, bringing the YTD total to 1.4 msf across 11 buildings. Construction remains concentrated in LA North and LA South, which collectively account for 79.0% of LA’s total square footage under construction. Meanwhile, the San Gabriel Valley and LA Central submarkets accounted for a combined 80.3% of YTD deliveries. Limited future deliveries should help mitigate additional supply pressure, support occupancy and reinforce rent stabilization as the market absorbs existing available space.
